Disclaimer (Block 1): This article is for educational purposes only and is intended to assist CEA-registered property agents in understanding regulatory frameworks. It does not constitute financial, tax, or legal advice. LEVR's calculations are indicative only. Always verify rates and eligibility with your bank, HDB, CPF Board, or a licensed financial advisor before advising clients.
What Is a Bridging Loan?
A bridging loan is a short-term loan that “bridges” the financing gap when a buyer needs to complete the purchase of a new property before receiving the sale proceeds from their existing property. It is typically used by upgraders who have already exercised an OTP or signed an S&P on a new property but whose current property has not yet been sold or completed.
Bridging loans are not a standard mortgage product — they are a temporary, high-cost facility designed to be repaid in full once the sale proceeds from the existing property are received.
When Is a Bridging Loan Used?
The most common scenario is the property upgrader who:
- Has exercised an OTP or committed to buy a new property (often launching or resale)
- Holds an existing property that is not yet sold, or has been sold but whose completion date falls after the new purchase completion date
- Has insufficient cash and CPF to fund the new purchase downpayment or stamp duty without the sale proceeds in hand
A bridging loan covers the shortfall between what the buyer can fund from existing resources and the total amount needed at completion of the new purchase.
Key Features of Bridging Loans in Singapore
| Feature | Typical Terms |
|---|---|
| Loan amount | Up to the net sale proceeds of the existing property (sale price minus outstanding mortgage minus CPF refund obligation). Lenders typically cap the bridging loan at the confirmed sale proceeds. |
| Tenure | Typically 6 months. Some banks offer up to 12 months. Expected to be repaid in full once the sale of the existing property completes. |
| Interest rate | Significantly higher than standard mortgage rates — typically prime rate plus 2%–3%, or approximately 5%–7% per annum at current market rates. Interest accrues daily on the outstanding balance. |
| Repayment structure | Interest-only during the bridging period. The principal is repaid in a lump sum when the existing property completes and net proceeds are received. |
| Security | The bridging loan is typically secured against the new property (together with the main mortgage) or sometimes against the existing property pending sale. |
| Processing time | Faster than a standard mortgage — some banks process bridging loans within 3–5 business days once the existing property's OTP or S&P is confirmed. |
How Bridging Loans Interact With TDSR
Bridging loans are counted as debt obligations under TDSR during the bridging period. This is a critical consideration for upgraders:
- During the bridging period, the borrower carries two mortgages: the existing property's mortgage (if not yet redeemed) and the new property's mortgage. Both count as debt in the TDSR calculation.
- The bridging loan monthly repayment (typically interest-only during the bridging period) also counts as a debt obligation.
- Banks assess TDSR at the time of the new loan application — the borrower must demonstrate that their income can service all three obligations simultaneously, even though the bridging period is short.
- Some banks allow a TDSR waiver or modified assessment for the bridging facility where the existing property is already sold (OTP exercised) and completion is confirmed within 6 months. The rationale is that the bridge will be repaid before the stress-test period becomes material.
Agents should advise upgrader clients to stress-test their TDSR under the dual-mortgage scenario before accepting the new property's OTP.
Worked Example
An upgrader owns a condo with an outstanding mortgage of $400,000. They have agreed to sell it for $1.2M. They are buying a new condo at $2.0M. Completion of the new purchase is in 10 weeks; completion of the existing property sale is in 14 weeks.
- Net sale proceeds: $1.2M − $400K (mortgage) − CPF accrued interest refund (assume $200K) = $600,000
- New purchase funding needed: 25% downpayment (if second property) = $500,000 cash + CPF; plus BSD ~$57,600 and ABSD $400,000 (SC second property, 20%) = ~$957,600 total upfront
- Bridging loan: Covers the $600,000 net proceeds expected, bridging the gap between new purchase completion (week 10) and existing sale completion (week 14)
- Bridging period cost: At 6% p.a. on $600,000 for 4 weeks ≈ $2,769 in interest
The bridging cost is modest relative to the transaction size, but the TDSR impact during the overlap period is significant and must be assessed before committing.
Risks and Practical Considerations
- Sale falls through or is delayed. If the existing property sale falls through after the new purchase has committed, the borrower must fund both properties without the expected proceeds. Bridging loans extended beyond 6–12 months become very expensive and may not be renewable.
- ABSD timing. For upgraders hoping to claim ABSD remission (SC couples selling existing home within 6 months of new purchase), the bridging loan timeline must align with the disposal deadline. Missing the 6-month window forfeits the ABSD remission.
- CPF refund reduces available cash. The CPF principal and accrued interest must be refunded to the seller's CPF accounts on the sale of the existing property. This reduces the net cash proceeds available to repay the bridging loan and fund the new purchase.
- Not all banks offer bridging loans. Some lenders do not offer standalone bridging facilities; they require the main mortgage and bridge to be with the same bank.
What Agents Should Know
- Always confirm the sale completion timeline before advising an upgrader to accept an OTP. If the new purchase completes before the existing sale, a bridging loan will be required. Advise the client to check with their bank before exercising.
- Sequence matters. Selling first and buying later eliminates the need for a bridging loan entirely and avoids the ABSD second-property rate risk. The trade-off is the risk of being between homes.
- Refer clients to a mortgage broker or bank early. Bridging loan approval depends on confirmed sale proceeds, TDSR capacity, and the lender's specific policies. Clients should not assume a bridging loan is available until it has been approved.
- Bridging loans are not eligible for HDB concessionary loans. HDB loans do not include bridging facilities — HDB-to-private upgraders must arrange bridging through a bank.
Disclaimer (Block 3): LEVR's calculator outputs are estimates based on inputs provided and current regulatory parameters as known at time of publication. They are not a guarantee of borrowing capacity, stamp duty liability, or CPF eligibility. Regulatory thresholds and rates may change. Always verify with IRAS, your bank, or a licensed financial advisor before making financial decisions.